The retired Canadian judge recommended a payout and slated "egregious errors" by Dunedin police "that led directly to the wrongful conviction". He also fingered Robin Bain as the killer.

However, Ms Collins also released a peer review by Robert Fisher, QC, which heaped criticism on Mr Binnie's findings. Dr Fisher listed 11 errors, including that Mr Binnie disregarded key evidence, and said Mr Binnie was "markedly generous" towards David Bain's version of events.

Ms Collins said it was "unacceptable to and unfair to New Zealanders" to take recommendations to Cabinet based on a "flawed" report.

Although Dr Fisher said both reports could be used to come to a conclusion about compensation, Ms Collins said it was "clear that there needs to be something of a review".

Mr Binnie's report cost taxpayers about $400,000. Dr Fisher was paid $100,000 for his four-month review. A new review could have taxpayers footing a final bill of about $1 million.

Estimates put Mr Bain's potential compensation at $2m. But Ms Collins said she would not put a dollar limit on justice.

"If Mr Bain is innocent, then a great injustice has been done to him over the years. If Mr Bain is not innocent and we were just to pay out money, then a great injustice would be done to a great many people," Ms Collins said.

By blaming police, Mr Binnie's report would have opened the door to a hefty compensation bill.

Although he said there was no criminality or deliberate misconduct, there was "investigative ineptitude".

"The miscarriage of justice was the direct result of a police investigation characterised by carelessness and lack of due diligence . . . there was an institutional failure on the part of the Dunedin CIB."

Mr Binnie said it was "more probable than not that Margaret and three of the Bain children were killed by Robin Bain before he turned the gun on himself and committed suicide". He concluded David Bain was a credible witness.

After days of public feuding, Mr Binnie backed away from the fight. "I welcome the opportunity to drop back into my place of obscurity," he said.

However, he did send an angry email to Ms Collins at 6am yesterday. The missive was littered with spelling errors and capital letters, used to emphasise his point.

He criticised Dr Fisher for not reviewing the evidence and said Ms Collins had made up her mind regarding the outcome of the review.

Mr Bain's lawyer, Michael Reed, QC, said there were no flaws in Mr Binnie's report, describing it as "brilliant".

"I'm deeply disturbed as to the process that's been followed, since August, in a one-sided provision of information to Fisher, and an inability on our side to be able to participate."

"The Dunedin police were experienced officers. They had dealt with the Aramoana tragedy in which 13 adults and children were shot and killed, and had investigated two other familial homicides in close proximity to the Bain murders. This was a multiple homicide with a difficult scene.

"Reviews of that 1994 investigation found it was conducted in accordance with the standards or the day and without fear or favour," Mr Marshall said.

Some errors were made and had been traversed by the courts.

"In regard to the failure to investigate the possibility of innocence - police investigators work on the weight of evidence. As the investigation progressed, the weight of evidence pointed to David as the killer. That evidence was put before the court."

Labour justice spokesman Charles Chauvel said Dr Fisher's criticisms were "overblown". Ms Collins should have asked Mr Binnie to review his initial work rather than paying another $100,000 to the Auckland lawyer, he said.

Ms Collins sought to reassure Mr Bain that the debacle would not affect his application.

"I feel for Mr Bain that he has suffered a further unfortunate delay and I wish to reassure him that ultimately these circumstances will not have an impact on his claim," she said.

JUSTICE BINNIE'S FINDINGS HIGHLIGHT POLICE ERRORS

Justice Ian Binnie found that:

David Bain is factually innocent on the balance of probabilities.

The "egregious errors" of Dunedin police led to the wrongful conviction.

In the interests of justice, compensation should be paid.

It was implausible David Bain would kill four people then embark on a paper round in blood-smeared clothes.

The bloodied sock print found was too small to be David Bain's but could have been left by Robin Bain.

Robin was depressed and stressed; expert evidence was that "David was quite normal".

Suicide was the likely cause of Robin's death.

Nothing connects David to Margaret Bain's broken glasses or opera glove at the scene, the presence of which is a mystery.

He found no intentional wrongdoing or criminality in police actions.

Police errors listed by Binnie included:

Police authorised the Bain house at 65 Every St to be burned to the ground less than three weeks after the murders, before all the relevant evidence had been collected.

Police failed to obtain from the pathologist important photographs of Robin's body taken at the mortuary.

Despite the important question of whether Robin's arm was long enough to reach the trigger of the rifle to shoot himself, his arm span was not measured.

Important elements of the testimony of police officers and ESR experts at the 1995 trial were shown on appeal to be misleading.

Efforts to clarify the DNA of the blood constituting David's fingerprint were described by one expert as "an unspeakable mess".

Some forensic evidence collected by police was ordered to be destroyed after the first trial.

FISHER CONCLUDES BINNIE MADE MANY MISTAKES

Robert Fisher, QC, said Justice Ian Binnie made the following errors:

Excluded significant evidence such as bloodstains on David Bain's clothing, the broken glasses, David Bain's fingerprints on rifle, Robin Bain's motive and mental stability, David Bain's post-event admissions, including that he heard Laniet gurgling.

Regarded the jury acquittal as relevant to whether Bain had proved his innocence.

Accepted Bain's version of events except where it directly contradicted other witnesses.

Arrived at a provisional conclusion of innocence based on one item - the bloody footprints evidence.

Was generous to Bain in its reliance on background facts sourced from him.

Instead of requiring Bain to satisfy him on the balance of probabilities, Binnie imposed an onus on the Crown where they were inconsistent with Bain's innocence.

Relied on innocent openness defences to turn incriminating admissions or clues into points thought to support Bain's genuineness and credibility.

Went beyond his mandate in concluding there were extraordinary circumstances and in recommending compensation.

Drew an adverse inference to the Crown where he believed police inquiries should have expanded.